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Loopholes- charged term to be avoided

Chaos88
Posts: 247
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9/18/2012 11:40:49 AM
Posted: 4 years ago
I think people should stop using the term loopholes when dealing with taxes, unless it is apt. It is not a loophole if what is being done was specifically intended to be done. When people use the term loophole, it is almost always with contempt.

Mirriam-Websters Definition of loophole
a means of escape; especially : an ambiguity or omission in the text through which the intent of a statute, contract, or obligation may be evaded
http://www.merriam-webster.com...

For example, charity donations. People will say this is a loophole because the rich can write of millions, saving them millions in taxes. However, isn't the purpose of this deduction to help fund charities? The law specifically states this is acceptable. So, how is this sinister?

To me, a loophole would be to avoid income taxes for a certain year by paying yourself in stock (not income until a gain is realized), and in the interim, using company money as a loan (not income). This was designed for hedge fund managers (to be paid in stock), but if others do it, it is legal, but not the intent, so that would be a loophole.

And for the record, hiding money in tax havens to avoid reporting interest income is not a tax loophole, it is illegal.
logicrules
Posts: 1,721
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9/18/2012 4:01:44 PM
Posted: 4 years ago
At 9/18/2012 11:40:49 AM, Chaos88 wrote:
I think people should stop using the term loopholes when dealing with taxes, unless it is apt. It is not a loophole if what is being done was specifically intended to be done. When people use the term loophole, it is almost always with contempt.

Mirriam-Websters Definition of loophole
a means of escape; especially : an ambiguity or omission in the text through which the intent of a statute, contract, or obligation may be evaded
http://www.merriam-webster.com...

For example, charity donations. People will say this is a loophole because the rich can write of millions, saving them millions in taxes. However, isn't the purpose of this deduction to help fund charities? The law specifically states this is acceptable. So, how is this sinister?

To me, a loophole would be to avoid income taxes for a certain year by paying yourself in stock (not income until a gain is realized), and in the interim, using company money as a loan (not income). This was designed for hedge fund managers (to be paid in stock), but if others do it, it is legal, but not the intent, so that would be a loophole.

And for the record, hiding money in tax havens to avoid reporting interest income is not a tax loophole, it is illegal.

LOL if there is no loop there is no hole. Thus, the law is the loop and be unintended allowance is the hole.
Chaos88
Posts: 247
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9/18/2012 6:28:13 PM
Posted: 4 years ago
At 9/18/2012 4:01:44 PM, logicrules wrote:
At 9/18/2012 11:40:49 AM, Chaos88 wrote:
I think people should stop using the term loopholes when dealing with taxes, unless it is apt. It is not a loophole if what is being done was specifically intended to be done. When people use the term loophole, it is almost always with contempt.

Mirriam-Websters Definition of loophole
a means of escape; especially : an ambiguity or omission in the text through which the intent of a statute, contract, or obligation may be evaded
http://www.merriam-webster.com...

For example, charity donations. People will say this is a loophole because the rich can write of millions, saving them millions in taxes. However, isn't the purpose of this deduction to help fund charities? The law specifically states this is acceptable. So, how is this sinister?

To me, a loophole would be to avoid income taxes for a certain year by paying yourself in stock (not income until a gain is realized), and in the interim, using company money as a loan (not income). This was designed for hedge fund managers (to be paid in stock), but if others do it, it is legal, but not the intent, so that would be a loophole.

And for the record, hiding money in tax havens to avoid reporting interest income is not a tax loophole, it is illegal.

LOL if there is no loop there is no hole. Thus, the law is the loop and be unintended allowance is the hole.

And if the law specifically addresses the action, where is the "hole"?
People would say the rich not paying taxes on municipal bond interest is a "loophole", even though it is specifically addressed in the tax code.

I am not saying the rich don't exploit the tax code (who wouldn't?), but it is not a loophole.
JaxsonRaine
Posts: 3,606
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9/18/2012 9:34:40 PM
Posted: 4 years ago
You're right.

If congress passes a law allowing real estate investors to take a deduction, to stimulate the private real estate market... it would be considered a loophole for a section of a bank to label itself as real estate investment to take advantage of the deduction.

It's usually clear whether something is a loophole or a deduction.... when people call legitimate deductions loopholes, just because someone is wealthy, then you have to turn around and call their own exemptions, deductions, and tax credits loopholes too.
twocupcakes: 15 = 13
RoyLatham
Posts: 4,488
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9/19/2012 1:01:15 PM
Posted: 4 years ago
The language is unfortunate, but we are stuck with it. All loopholes are legal tax deduction passed by Congress to encourage particular behaviors. Using loopholes means you are complying with preferences the legislature wants. None of them are accidental. They serve to shift money from economically efficient uses to inefficient uses that further an agenda. There are about 3500 loopholes in the tax code.

1930s comedian W.C. Fields was in the hospital late in his life. A friend visiting him found Fields reading the Bible. Shocked, the friend aid, "Bill, I've never seen you reading the Bible before. What's happened?" "I'm looking for loopholes."
Double_R
Posts: 4,886
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9/20/2012 3:14:01 AM
Posted: 4 years ago
I agree. I think a big part of the problem is that we have many senseless write offs in the tax code, like some business owners who get to take tax deductions for having to go through the trouble of eating out at a nice restaurant. If we get rid of some of those that might help.